14.2
TIPS-Treasury Arbitrage
PYTHON PLUGIN
Miscellaneous
Arbitrage
Description
Strategy 14.2: Sell Treasury, buy TIPS + inflation swaps when replication cost C(0) is positive
Strategy Logic
Strategy 14.2: TIPS-Treasury Arbitrage.
Sell a nominal Treasury bond and buy TIPS plus inflation swaps to
replicate the Treasury's cash flows. The cost of replication:
C(0) = P_Treasury - P_TIPS - sum(STRIPS adjustments)
Historically C(0) tends to be positive (the synthetic Treasury is
cheaper than the real Treasury), generating a riskless profit.
Signal: enter trade when C(0) exceeds a configurable transaction-cost
threshold.
Required columns: treasury_price, tips_price, swap_adjustment
Parameters
| Parameter | Default Value | Type |
|---|---|---|
| cost_threshold | 0.5 | float |
| exit_threshold | 0.05 | float |
| lookback | 60 | int |
Risk Configuration
| Risk Parameter | Value |
|---|---|
| Max Position Pct | 10.0% |
| Stop Loss Pct | 2.0% |
| Take Profit Pct | 3.0% |
| Max Drawdown Pct | 5.0% |